Irish Funds Singapore Seminar 2016

Transcription

1 Irish Funds Singapore Seminar 2016 Hosted by: 18 August

2 Welcome remarks Mr. Ross Church Deputy Head of Mission, Irish Embassy Singapore Mr. Pat Lardner Chief Executive, Irish Funds

3 Who/what we are. industry association for all aspects of regulated cross border funds in Ireland representative function promotional function 113 member firms, located both in and outside Ireland key link to the authorities & policy makers in Ireland and beyond the industry s representative in Europe and globally a platform for collaboration, information sharing and driving outcomes & improvement

4 The Irish funds industry supports managers from all over the world full range of services for Irish domiciled funds as well as providing expert services for funds domiciled outside of Ireland Fund Manager Irish Administered Funds solutions are provided to managers across the full spectrum of investment strategies Irish Domiciled Funds UCITS Non Domiciled Funds AIFs

5 Long track record of delivery Total Assets under Administration, Euro billions Source: Central Bank of Ireland and Irish Funds

6 Scale, Diversity and Momentum to support you Irish Domiciled Funds Product Breakdown Euro billions Source: Central Bank of Ireland and Irish Funds

7 Ireland and Southeast Asia in Partnership Mr. Gerard Whitty Director, IDA Ireland ASEAN and Taiwan

8 Ireland: Recent Economic Performance Financial Services Success Stories & IFS2020 Launch Gerard Whitty, Director, ASEAN & Taiwan IDA Ireland, Singapore Office

9 Fastest Growing Advanced Economy in the World Ireland s economy grew 7.8% in times faster than the EuroArea average & entered its 5 th consecutive year of economic expansion in 2016; GDP up 2.3% in Q Forecast to be the fastest growing economy in the EU in 2016 (EU, IMF, OECD). Significant job growth over the last 4 years: unemployment rate at 7.8% (May 2016), down from a peak of 15.2% in January % 8% 6% Real GDP Growth 2015 was a record year for FDI with 213 projects won - a net increase of 12,000 jobs created by IDA Ireland client companies. Budget deficit of 2.3% for 2015: well below EU limit of 3%. Irish Govt. debt has an A grade investor rating with all major Ratings agencies**. 4% 2% 0% * 2017* Sources: IMF World,OECD Economic Survey of Ireland 2015, European Commission *Department of Finance, 2016 Spring 2016 Economic Forecasts **Standard & Poor's, Fitch, Moody's, DBRS, R&I

10 Ireland s economy remains strong in the face of BREXIT Ireland will continue to be a core member of the EU single market and Euro currency. Rating agency S&P maintained Ireland s A credit rating noting that they expect the Irish economy to stay resilient enough to withstand the negative impact of the Brexit. The prudent economic and fiscal policies implemented over recent years have placed Ireland in a stronger position to weather any negative spill-over from a UK downturn: Competitiveness has improved significantly; Employment has increased significantly, and unemployment has fallen - 7.8% in June 2016; Our debt ratio has fallen from 120% in 2012 to 79% in The Irish Government is implementing its Capital Investment Programme, rapidly expanding the capacity of the economy in areas such as infrastructure, commercial real estate and housing. Department of Finance Summer Economic Statement See Programme for Govt.in special interest topics for more detail Capital Investment Programme

11 H % v 2015 which was a record year 110 FDI investment projects creating 9,000 jobs; 10% up on H

12 Developed International Financial Services Sector The International Financial Services (IFS) sector has been an important feature of Ireland's economy for over 30 years Companies employing over 38,000 people. 17 of the top 20 global banks have business operations in Ireland. 40% of the world s Hedge Funds serviced from Ireland. No. 1 location in Europe for cross border life, non-life and reinsurance activities. Global leader in aviation leasing (over 40% of all commercial leased aircraft are leased or managed out of Ireland). Growing international payments cluster with over 45 companies Leading financial technology location in Europe. Along with the UK, Ireland captures most of the FinTech venture investment in Europe.

13 Successful Track record in attracting major global players Banking Investment Management Insurance

14 Recent Announcements from IFS Companies

15 IFS2020: A Strategy for Ireland s International Financial Services Industry Irish Government s vision for the future for IFS. Presents a five year strategy to further develop Ireland as a global leader in this sector. Grow the level of direct employment in the IFS sector from 35,000 to 45,000 by Sets out five strategic priorities with 30 actions to be implemented: 1. Promote Ireland as a location for international financial services 2. Improve operating environment & competitiveness of Ireland's IFS sector 3. Drive research, innovation & entrepreneurship in IFS sector 4. Develop emerging IFS sub-sector 5. Establish Implementation Framework for IFS2020

16 IFS2020: A Strategy for Ireland s International Financial Services Industry

17 IFS2020: A Strategy for Ireland s International Financial Services Industry

18 IFS2020 & European Financial Forum: Singapore Events Mr. Eoghan Murphy T.D. Minister of State for Financial Services, egovernment and Public Procurement at the Departments of Finance Visiting Singapore on Wednesday, 21 st September 2016 Business Fullerton Hotel (8am 9.30am) Public NUS, Centre of Banking and Finance Law, (3pm 4.30pm)

19 To learn more log on to idaireland.com idaireland@ida.ie

20 Brexit: Beyond the Referendum on EU Membership Mr. Pat Lardner Chief Executive, Irish Funds

21 Managers needs pre/post vote have not changed Objective to grow/scale their businesses cross-border by accessing passports for products and services Effective EU based national regulatory and taxation regimes are vital enablers Expert knowledge/skills across a range of providers covering the full breadth of investment strategies/asset classes very important Being able to conduct business efficiently is expected (language, legal system, service culture, cost) Ireland has done this very successfully for over 20 years

22 Why Ireland? Distribution and investor support Global Distribution of Irish Funds: 70 countries Sales Registration: Top 5 Markets for Irish UCITS 17% 24% 18% 22% 20% broad mix of institutional and retail clients 30 languages supported 23 currencies supported United Kingdom France Netherlands Germany Switzerland Source: Lipper, PwC & Irish Funds, 2015 Source: Lipper, PwC & Irish Funds,

23 UK Referendum & Brexit The outcome was a surprise to most Things which are certain/clear: Ireland remains a committed member of the EU Irish domiciled funds access to the EU single market unchanged UK remains a member of the EU for the foreseeable future Big questions to which there are not yet clear answers UK s status at the end of the process? When will the process start? How long will the process last? Questions we are being asked by managers - how can they work with Ireland to retain access to the EU in providing?: Direct portfolio management services Funds Our members are helping managers and providing solutions

24 Assumption risk Assumption/ Noise Reality Impact Pre Referendum Will be close but UK will vote to remain in Narrow vote to leave Most entities unprepared Post Referendum Article 50 notification will happen very quickly Seems to be moving further away Pre-exit period will be very lengthy Passports and access remain unchanged until the UK actually leaves so little to do right now Depends on strategies you manage/delivery mechanisms/target market(s), your business model and what clients want Staying informed important to know where you need to act now and to minimise future assumption risk UK won t implement EU regulations going forward Still full EU members and part of ESMA Equivalence as a 3 rd Country highly relevant Too early to tell

25 Key Focus Areas UCITS Product based passport linked to EU domicile No equivalence or 3 rd Country rules Pre-existing routes remain open to Asian managers AIFMD Two passports (management & marketing) linked to manager Passport (EU AIFMs) & Private Placement (NonEU AIFMs) coexist at present 3 rd Country access, equivalence still a work-in-progress which complicates matters MiFID Passporting rights attach to EU based firms Which services/clients are UK based MiFID entity working with? MiFID2 on the way again take care

26 Our activity since the vote Engage with Irish government, regulator, agencies Funds industry high on the agenda Ireland ready and able to provide help to those who need it Alongside our 38 Working Groups we are breaking the big question into a number of smaller ones Identifying/working through positions which may arise in the negotiations Develop specific communication and information aids Engage with EU colleagues Meeting with our members / handling inbound enquiry Speak to other stakeholders / peers Listening & acting responsibly Ensure we can assist managers irrespective of their starting point

27 Some things we are seeing post the vote/more recently Management Companies (ManCos) UCITS: interest in establishing Irish UCITS ManCos to ensure EU access continues irrespective of outcome (product holds the passport) AIFMs: UK AIFMs looking to preserve EU marketing access considering establishing an Irish AIFM, appointing an Irish AIFM or using a platform European clients/segregated mandate solutions under MiFID a potential question where EU based client wants to contract with an EU based provider of services Offerings aimed at pension fund investors in multiple jurisdictions Preserving tax transparency important - more inbound enquiry on the Irish Common Contractual Fund (CCF) Irish CCF Master/Local Feeders in both EU and non-eu markets Solvency II related More onerous liquidity requirements impacts how collateral provided Can funds/fund units play a part?

28 Irish Domiciled Funds: AIFs Qualifying Investor Alternative Investment Funds (QIAIFs) QIAIFs Net Assets and Number of Funds Source: Central Bank of Ireland

29 Other local developments. Updating of Ireland s Investment Limited Partnership Legislation Approved by Irish Government / legislation being worked on at present Will provide additional scope for private equity and real asset funds ESMA advice on possible extension of the AIFMD passport published on 19 July 2016 no significant obstacles impeding application of the AIFMD passport to Singapore will now be considered by the European Commission, Parliament and Council EU Capital Markets Union Call for evidence submissions completed in January 2016 We have subsequently met with the European Commission Project will continue despite UK position

30 What does the industry in Ireland provide? EU Single Market Access: product & service passports Investor Access: European Market and beyond 7th IMD WORLD COMPETITIVENESS 2016 YEARBOOK Service Excellence Low Costs Low Tax Environment 1 st FLEXIBILITY AND ADAPTABILITY OF PEOPLE Regulatory Environment Commitment from Government Infrastructure : language/legal/telecommunications 1 st IN EUROPE FOR COMPLETION OF 3 RD LEVEL EDUCATION

31 Brexit: The Dynamics and Challenges - A Practical ASEAN Perspective Moderator Ms. Yoon Ng, Director, Spence Johnson Panelists Mr. Paul Moloney, Consultant, Eversheds Mr. Tony Lewis, Area Head, HSBC Securities Services, Singapore Mr. Bill Jamieson, Partner, Colin Ng & Partners LLP

32 Asian Passports Coming of Age Mr. Armin Choksey Director, PwC Singapore

33 Asian Fund Passports Overview Hong Kong and Mainland Mutual Recognition of Funds Asia Region Fund Passport ASEAN CIS Status: Live 1 July 2015 Countries in scope: China and Hong Kong Status: MOC signed in April months from June 2016 to full implementation Countries in scope: Australia, Japan, New Zealand and South Korea Status: Live 25 August 2014 Countries in scope: Malaysia, Singapore and Thailand PwC 33

34 Who are joining? and who s next? Japan South Korea Philippines Thailand Singapore Australia New Zealand PwC 34

35 Removal of tax discrimination is the key to its success Example of discriminatory tax outcomes Tax discrimination at investor level Distributed to = investor 100 Distributed to = investor 85 Resident investors Non-resident investors (Exempt at fund level) Fund income 100 Tax cost nil Distributed to investors 100 Resident Fund Resident Fund Nonresident Fund (Exempt at fund level) Fund income 100 Tax cost 15 Distributed to investors 85 Fund income 100 Tax cost nil Distributed to investors 100 Resident Fund Resident Fund Fund income 100 Tax cost 15 Distributed to investors 85 Both funds receive the same distribution of 100 from underlying investments PwC 35

36 Development of Asia Pacific mutual funds AuM CAGR** : 7.5% ,263 Jun ,510 Total AuM* in USD bn * Australia, China, Hong Kong, India, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan, Thailand Source: PwC analysis based on ICI and local fund associations data ** CAGR : Compound Annual Growth Rate during the period PwC 36

37 Development of Asia Pacific mutual funds AuM ARFP CAGR** : 7.0% CAGR** : 3.0% Japan , , ,296 South Korea Philippines Total AuM* in USD bn Thailand Australia Singapore Source: PwC analysis based on ICI and local fund associations data ** CAGR : Compound Annual Growth Rate during the period PwC New Zealand 37

38 Development of Asia Pacific mutual funds AuM ASEAN CIS CAGR** : 8.9% CAGR** : 8.6% Total AuM* in USD bn Thailand Malaysia Singapore Source: PwC analysis based on ICI and local fund associations data ** CAGR : Compound Annual Growth Rate during the period PwC 38

39 ASEAN CIS Key principles Approved for retail offer in home country Legal structures approved for CIS offered to retail investors (i.e. Authorised scheme approved by MAS) Common standards imposed on Qualifying Manager, Trustee and CIS Qualifying CIS Operator (locally regulated) Track record (5 years, US$500m global AUM) At least US$1m capital Competency & experience Delegation restrictions Qualifying CIS (locally domiciled) No performance fees Transferable securities Investments into other funds permitted Limits on derivatives Annual compliance audit Appoint local distributors and local representatives Annual audit of the CIS Operator covering, at a minimum, compliance with the Common Standards Use of locally licensed intermediaries in host country May need to appoint a local representative Subject to host country requirements on offer of CIS No performance fees No repo or SEC lending Limit on delegation PwC 39

40 China-Hong Kong Mutual Recognition of Funds ("MRF") The Securities and Futures Commission in Hong Kong ( SFC ) and the China Securities Regulatory Commission in China ( CSRC ) jointly launched the Mutual Recognition of Funds scheme which has become effective since 1 July The scheme allows eligible funds to be distributed in each other s market through a streamlined vetting process. Total AUM (including locally domiciled mutual funds only) Hong Kong US$60 billion China RMB5,241.4 billion Total number of mutual funds 1,126 2,027 Total number of mutual funds eligible for MRF About 100 About 850 Number of mutual funds applied for distribution 35 China-domiciled funds have received approval for distribution in Hong Kong 6 Hong Kong-domiciled funds have received approval for distribution in China PwC 40

41 China-Hong Kong Mutual Recognition of Funds ("MRF") SFC requirements for entry to Hong Kong Domiciled on the Mainland Fund registered with CSRC Established and authorised for over one year Fund size not less than RMB200 million Less than 20% of assets in Hong Kong Distribution to Hong Kong investors doesn t exceed 50% of total assets Investment management function remains on Mainland Must appoint a Hong Kong representative CSRC requirements for entry to mainland China Domiciled in Hong Kong Fund registered with SFC Established and authorised for over one year Fund size not less than RMB200 million Less than 20% of assets in Mainland Distribution to Mainland investors doesn t exceed 50% of total assets Investment management function remains in Hong Kong Must appoint a Mainland agent PwC 41

42 ARFP - UCITS comparison Set up in Home prior to Host UCITS III Host registration Limited additional requirements for hosting Management Company = Operator Fair value principles Custody of assets by Trustee/ operator and not depository Independent depository/ operator Single entity risk 15% v/s 10% Reporting obligations Sec lending 50% v/s 100% NAV calculation by Operator Delegation limitations Degree of similarity Synthetic shortselling through derivatives Physical shortselling banned Depository responsible for delegation Low Similar Identical PwC 42

43 Reality check! Still no uniform access for offshore funds in Asia Region Country Typical Offshore Fund Legal Structure Market Access Singapore SICAV Direct Developed Asia Hong Kong SICAV Direct Japan FCP / SICAV Direct Australia Fund of funds + Master Feeder funds Indirect Developing Asia Taiwan SICAV Direct Korea Onshore feeder funds and wrappers, fund of funds & master-feeder funds Direct and Indirect China QDII and Direct via HK-China Mutual Fund Recognition India Closed Emerging Asia Malaysia Thailand Onshore feeder funds and wrappers, fund of funds & master-feeder funds Direct via the ASEAN CIS Regime Indonesia Closed PwC 43

44 Reality check! State of readiness Current Size Growth Potential Opportunity Market Access Tax issue? Method of Entry AU Large Moderate Retail & Inst. Low Yes Onshore SG Small Low Retail & HNWI High No On/ Offshore PH TH Small Low Retail Low Yes Onshore Small Moderate Retail & Inst. Low Yes Onshore NZ KR HK Small Low Retail Low Yes Onshore Medium Moderate Retail & Inst. Low Yes Onshore Medium High Retail & HNWI High No TW Medium High Retail & Inst. CH MY JP On/ Offshore Moderate to High No Offshore Large High Retail Low to Moderate Yes Onshore Small Large Moderate Moderate Retail & Inst. Retail & Inst. Low to Moderate Yes Onshore Moderate to High Source: PwC research / European Asset Management Conference 2015 PwC 44 No On/ Offshore

45 Lots of reasons to be excited Wealth is growing in Asia, and the upside for fund penetration is attractive Significant investments in infrastructure, real estate and other assets will need to be made Economic integration in Asia is becoming a reality Can you afford not be invested in Asia? PwC 45

46 Outsourcing Risk Management: Insights on the latest MAS Guidance Moderator Ms. Philippa Allen, CEO, ComplianceAsia Consulting Ltd Panelists Mr. Scott McLaren, Head of Hong Kong, Brown Brothers Harriman Ms. Michelle Lloyd, Head of Irish Asia Desk, Maples and Calder Mr. Ken Forbes, Head of Asia Operations, Henderson Global Investors

47 Closing Comments Mr. Tony Riha Asia Representative, Irish Funds

48 Irish Funds Singapore Seminar 2016 Hosted by: 18 August

49 Disclaimer: The material contained in this document is for marketing, general information and reference purposes only and is not intended to provide legal, tax, accounting, investment, financial or other professional advice on any matter, and is not to be used as such. Further, this document is not intended to be, and should not be taken as, a definitive statement of either industry views or operational practice. The contents of this document may not be comprehensive or up-to-date, and neither Irish Funds, nor any of its member firms, shall be responsible for updating any information contained within this document.